New bid to stem scrap metal exports

The International Trade Administration Commission (Itac) will soon issue new guidelines for the compulsory sale of ferrous and nonferrous waste metals on the local market in its continuing effort to stem exports worth billions of rands each year.

The new guidelines aim to stop scrap-metal dealers from exploiting loopholes in the preferential pricing policy issued by the Department of Economic Development last September.

Itac chief commissioner Siyabulela Tsengiwe said the revised guidelines, to be issued shortly, would strengthen the system of control.

Many countries impose duties to prevent the export of scrap metals such as copper, brass, lead, aluminium and zinc, a valuable economic resource that is used to produce a range of manufactured goods.

A clampdown on exports is in line with the government’s policy of promoting local beneficiation and stimulating the manufacturing sector.

South African scrap-metal exports are estimated at about 1.5 million tons annually, or about 40% of the total collected stock.

Last year 52,000 tons of scrap aluminium was exported for an estimated R830 million while in the first six months of this year — after the preferential policy was implemented — exports totalled 25,500 tons. This shows the policy has not had much effect.

Itac’s move follows complaints by the Non-Ferrous Metal Industries Association (NFMIA) and other industry associations that scrap-metal merchants were subverting the government directive that they offer their products to domestic foundries, small mills and secondary smelters at a 20% discount to the international spot price before they could be issued with export permits by Itac.

NFMIA and Steel and Engineering Industries Federation of SA economic council chairman Bob Stone recently told Parliament’s trade and industry portfolio committee that the preferential pricing policy had not been successful in lowering prices.

Neither had it stopped the flow of exports.

“To date no company within the nonferrous metal sector has been able to report having purchased scrap metal at any price approaching the issued preferential price,” he said.

“On the contrary, prices of the most popular grades of scrap have, in many cases, increased.”

The high price of scrap metal — which represents about 62% of the total cost of production of a range of beneficiated products made from scrap metal — has made local producers uncompetitive, contributing to the closure of foundries and other businesses, Mr Stone said.

The Metal Recyclers Association (MRA) tried to obtain an interdict against the government’s export control policy in the High Court in Pretoria in November last year but lost their case.

Industry sources said scrap-metal dealers then embarked on a strategy of subversion by demanding impossible sale conditions. They refused to deliver the scrap and demanded upfront cash payment and documentation.

This forced metal fabricators and beneficiators to relinquish their right to the legislated discount and to pay the price demanded by the suppliers.

In its submission to Itac on the revised guidelines, the NFMIA noted that the scrap merchants were using “blocking tactics to prevent a sale” so they could then get an export permit.

“Scrap metal merchants have concocted many inventive and frivolous excuses to justify why they will not, cannot and flatly refuse to honour the gazetted policy,” the association stated.

In terms of the draft guidelines issued by Itac in May for public comment, the preferential price must include the cost of transport and insurance. Payments must be made within seven working days of delivery and other terms of sale must be “reasonable” and in line with previously existing terms.

The MRA could not be contacted for comment at the time this article was published in Business Day.